Rentokil sees City Link fail to deliver profits

Rentokil Initial's loss-making City Link business will fail to deliver a profit by the year end.

In a third-quarter update, Rentokil Initial Chief Executive Officer, Alan Brown said: "Challenging conditions across Europe, including the UK, have limited group revenue growth in the third quarter. Outside Europe our businesses are considerably more buoyant."

"City Link's operational recovery continued during the third quarter with a 12% year-on-year reduction in cost per delivery. Volume grew 15% and operating losses fell by 19% year on year, though both were adversely impacted by lower than expected demand during the Olympics. We have also continued to see a reduction in revenue per consignment as a result of adverse customer mix. The impact of this is now expected to result in a small loss for the fourth quarter."

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For the third quarter ended September 30th revenues rose 1.6% to £626.7m with pre-tax profits up 0.8% at £36.3m. For the nine months, revenues were almost flat at £1.88bn although pre-tax profits rose 26.2% to £82.9m.

It has made cost savings of £37.2m for the year to date and expects to exceed its £50m target for 2012.

Operating cash flow of £44.6m was £10.9m lower than for the third quarter in 2011 primarily due to the phasing of working capital. Net debt at September 30th was £943.2m.

CM